U.S. Broadens Hunt for Tax Evaders
Prosecutors Trace Accounts Across the Globe as Authorities Pressure Swiss Banks
The hunt for money hidden in Swiss bank accounts by U.S. citizens has become a global chase, with prosecutors tracing records to Singapore, the Cook Islands and elsewhere as U.S. authorities increase the pressure on Swiss lenders to turn over evidence, according to officials.
Kathryn Keneally, head of the Justice Department’s tax division, said in an interview that in the wake of a guilty plea to criminal charges by Credit Suisse Group AG CSGN.VX +1.56% , the U.S. expects to collect more evidence pointing to suspect accounts beyond Switzerland’s borders.
Credit Suisse, which last week pleaded guilty to conspiracy and agreed to pay $2.6 billion to settle allegations it helped wealthy Americans hide money from the Internal Revenue Service, has agreed to turn over some bank records that can help U.S. authorities track down individual account holders across the globe.
“It’s fair to say we know where the tax-haven countries are. You’ve got Singapore, you’ve got the Cook Islands,” said Ms. Keneally, who plans to announce Tuesday that she will leave the Justice Department to return to private practice. She said the U.S. has traced money transfers to banks in India, Israel, Luxembourg, Lichtenstein, the Cayman Islands and other Caribbean countries.
The Credit Suisse settlement is part of a broader effort by the U.S. to pressure Swiss banks to help authorities track money of U.S. citizens.
More than 43,000 Americans have sought to join the U.S. government’s voluntary disclosure program, in which individuals can self-report previously undisclosed overseas accounts and work out a payment plan with the IRS that avoids criminal charges.
About 100 Swiss banks have applied to join a Justice Department program that allows them to voluntarily turn over records about possible undisclosed U.S. accounts.
“I think Credit Suisse is significant beyond tax enforcement,” said Ms. Keneally. The terms of the bank’s plea “shows an important balance of holding a financial institution liable for its conduct without causing undue harm on innocent employees, and the economy generally, that might flow from how you treat a bank with criminal liability.”
Ms. Keneally signaled the U.S. may extend next month’s deadline for Swiss banks to turn over records to give lenders more time to communicate with clients and provide the expected information. She didn’t say how long the extension would last.
“We expect to get from the Swiss banks a wealth of information that will lead us to the rest of the world, and that information will be fueling our investigations for some time into the future,” she said.
When word first spread in 2008 that the U.S. was making a new push to ferret out Americans hiding taxable money in Switzerland, some account holders chose to move money further out of the reach of U.S. authorities. But prosecutors expect the Credit Suisse settlement, along with separate voluntary disclosure programs for Swiss banks and account holders, to lead prosecutors to a trove of American accounts.
“The ultimate goal is to make this a crime that is foolish to commit,” Ms. Keneally said. “It’s going to be harder and harder to engage in this conduct. There’s going to be fewer and fewer places in the world where a taxpayer can attempt this crime, and they will be less and less trusty places.”
Scott Michel, a lawyer who advises clients on these issues, said sticking to the deadline for about 100 Swiss banks to discuss the issue with their American clients, then present a potentially large volume of records in about five weeks would be “almost physically impossible.”
The Justice Department, the lawyer said, “is sending a less-than-subtle message to banks around the world, that if you have a problem, you should come see us now, rather than wait for them to put together the puzzle pieces and come to them.”